Incorporation of LLP Quiz

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Questions and Answers

What is the regulating act for Limited Liability Partnerships (LLP)?

Companies Act, 1956

LLP Act, 2008 (correct)

Partnership Act, 1932

Business Act, 2010

How are the contributors in an LLP referred to?

Partners (correct)

Shareholders

Members

Investors

What governs the internal governance structure of an LLP?

Board resolutions

Statutory regulations

Contract agreement between partners (correct)

Ministry guidelines

What suffix must the name of an LLP include?

LLP Signup and view all the answers

What is the minimum number of members required to form a public company?

7 members Signup and view all the answers

Which of the following statements is true regarding maximum membership in a private company?

Maximum 200 members Signup and view all the answers

What type of entities can be members of an LLP?

Individuals or body corporate Signup and view all the answers

Which act regulates the internal governance structure of a limited liability company?

Companies Act, 2013 Signup and view all the answers

What is required for the incorporation of a Limited Liability Partnership (LLP)?

At least two persons must associate for carrying on lawful business. Signup and view all the answers

Which statement is NOT required to be included in the incorporation document?

The date of establishment of the LLP. Signup and view all the answers

Who can certify that all incorporation requirements have been complied with?

An advocate, Company Secretary, Chartered Accountant, or Cost Accountant. Signup and view all the answers

What does the incorporation document need to state about the partners?

The name and address of each partner. Signup and view all the answers

Since when are incorporation documents processed electronically by the Registrar?

2nd October 2018. Signup and view all the answers

Which information is NOT typically required in the incorporation document?

The tax identification number of each partner. Signup and view all the answers

What must be filed along with the incorporation document?

A statement made by an advocate or similar professional. Signup and view all the answers

What is essential for a person to participate in the incorporation of an LLP?

To be associated with at least one other person. Signup and view all the answers

What is the primary characteristic of an LLP that allows it to continue existing regardless of changes in partners?

Perpetual succession Signup and view all the answers

Which statement accurately describes the liabilities of partners in an LLP?

Partners have limited liability to their agreed contributions Signup and view all the answers

How is the mutual rights and duties of partners within an LLP formed?

Through a written agreement between partners Signup and view all the answers

Which of the following statements about LLP as an artificial legal person is correct?

An LLP can enter into contracts in its own name Signup and view all the answers

What is the implication of mutual agency in an LLP?

Partners are shielded from liabilities caused by unauthorized acts of others Signup and view all the answers

Under what conditions can the mutual duties of partners in an LLP default to Schedule I of the LLP Act?

In the absence of an LLP Agreement Signup and view all the answers

What does the LLP Act allow regarding the existence of a common seal?

Common seals are only optional if decided by the LLP Signup and view all the answers

Which of the following is a limitation of an LLP compared to a natural person?

An LLP cannot take an oath or marry Signup and view all the answers

Which statement is true regarding the legal characteristics of an LLP?

An LLP has a legal personality separate from that of its members. Signup and view all the answers

What is the minimum period a person must stay in India to be considered a resident for LLP purposes?

182 days during the current year. Signup and view all the answers

Can a limited liability partnership (LLP) be formed with only a husband, a wife, and a Hindu Undivided Family as partners?

Yes, because there are no restrictions on types of partners. Signup and view all the answers

In the scenario where two non-residents are designated partners in an LLP, what is the implication under the LLP Act?

The LLP can have both residents and non-residents as designated partners. Signup and view all the answers

What happens if the assets of an LLP are insufficient to cover a creditor's claim?

Creditors can only claim from the assets of the LLP. Signup and view all the answers

If a name of an LLP closely resembles an already registered partnership firm, what action can be taken?

The LLP must change its name if requested by the firm. Signup and view all the answers

Which of the following is NOT a feature of a Limited Liability Partnership?

Mandatory appointment of company directors. Signup and view all the answers

What is the main advantage of LLPs concerning personal liability?

Partners enjoy limited liability protection. Signup and view all the answers

What is one key feature of a Limited Liability Partnership (LLP)?

Liability for partners is limited to their agreed contribution. Signup and view all the answers

Which of the following statements is true regarding the conversion of a listed company into an LLP?

A listed company can convert to an LLP. Signup and view all the answers

Which of the following individuals is not eligible to become a partner in an LLP?

An individual found of unsound mind by a court. Signup and view all the answers

What constitutes a suitable use of an LLP structure based on its flexibility?

It is suitable for small enterprises seeking venture capital. Signup and view all the answers

If a partner resigns from an LLP but does not inform the Registry of Companies (ROC), what is the consequence?

The partner remains liable for transactions after resignation. Signup and view all the answers

Under the Limited Liability Act, how are the assets of an LLP treated?

The LLP itself is liable for the full extent of its assets. Signup and view all the answers

What is the minimum duration a person must have stayed in India during a financial year to be recognized under the Limited Liability Act?

120 days Signup and view all the answers

Which of the following statements about the partners in an LLP is accurate?

The liability of partners is limited to their contribution. Signup and view all the answers

Study Notes

LLP vs. Limited Liability Company

Regulating Acts: LLPs operate under the LLP Act, 2008, while Limited Liability Companies follow the Companies Act, 2013.
Partnership vs. Membership: Individuals contributing to LLPs are referred to as partners, whereas members of a company are those who invest in shares.
Internal Governance: LLP governance is determined by a contractual agreement between partners; companies follow statutory regulations.
Name Requirement: LLP names must include "Limited Liability Partnership" or "LLP," while companies include "Limited" for public companies and "Private Limited" for private companies.
Membership Restrictions: LLPs require a minimum of 2 partners; no maximum limit exists. Private companies have a minimum of 2 and a maximum of 200 members; public companies need at least 7 members and have no upper limit.

Incorporation Process for LLP

Incorporation Requirements: A minimum of two individuals must complete an incorporation document and file it with the Registrar of the relevant State.
Documentation for Formation: Required documents include the name of the LLP, proposed business, registered office address, and details of partners and designated partners.
Legal Entity Status: LLPs are separate legal entities, maintaining perpetual succession regardless of changes in partners.

Key Features of LLP

Perpetual Succession: LLP existence continues despite partner changes due to death, insolvency, or retirement.
Separate Legal Entity: LLPs are legally distinct from partners; creditors can only claim from LLP assets, not individual partners' assets.
Mutual Agency: Partners are shielded from liability arising from unauthorized actions by other partners.
LLP Agreement: Partners define their rights and duties in an LLP agreement, with flexibility allowed; in its absence, default provisions apply.
Artificial Legal Person: LLPs function like individuals legally but cannot perform certain human actions (e.g., marry, go to jail).

Taxation and Conversion

Taxation: Members of an LLP are taxed similarly to partners; they enjoy the benefits of limited liability while maintaining a partnership structure.
Conversion Rights: Listed companies can convert into LLPs under specified regulations.

Resident Definition in LLP Context

Definition Criteria: Residency for LLP purposes includes individuals staying in India for specified days throughout the current and previous financial years.

Descriptive Questions Overview

LLP Benefits: Flexibility in organization and limited liability protections make LLPs suitable for small and service-oriented businesses.
Partner Eligibility: Individuals or bodies corporate may join LLPs unless deemed mentally unsound or undischarged insolvents.

Legal Considerations for Partners

Liability for Debt: Partners of an LLP are generally not personally liable for the organization's debts beyond their contributions.
Name Registration Issues: Existing partnerships may challenge LLP name similarity, possibly necessitating a name change for compliance.
Partner Resignation: Failure to notify authorities of a partner's resignation may lead to ongoing liabilities for that partner regarding subsequent firm transactions.

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Description

This quiz covers the key aspects of incorporating a Limited Liability Partnership (LLP), including the minimum requirements, necessary documents, and distinctions from limited liability companies. Test your knowledge on the regulations governing LLPs and their formation process.